The Land Compliance group reviews all active leases to ensure lessees are in compliance with lease terms. PrairieSky Royalty values its relationship with all of its lessees and strives for continued improvements in its Land Compliance program. From time to time changes are made to either processes or forms and we encourage lessees to revisit the site periodically for updates.
Assignments & Devolution of Title
Notices concerning lease compliance matters will be addressed to all registered lessees recognized in our mineral land records. We are unable to accept responses from parties whose interests are “held in trust” or parties that have acquired an interest in the leased lands without our consent. It is a requirement of most PrairieSky fee title mineral leases that our written consent is obtained prior to any transfer of a lessee’s leased interest to another party. In the event that the recipient of a notice no longer holds an interest as lessee in the lease, a lease assignment is required. For the information and use of all lessees, below is a copy of our standard form:
PrairieSky does not accept electronic signatures related to records that transfer a lessee interest in land. The Electronic Transactions Act (Alberta) does not apply to such transfer of interests in land and until such time as the legislation is amended, PrairieSky will require original signatures on Lease Assignment Agreements. (Updated October 2017)
Similar to the Crown, we will NOT consent to an assignment if:
- the interest being assigned is less than an undivided interest in
the entire lease (i.e. an assignment for a portion of the leased
lands, leased substances or leased formations will not be
approved) unless specifically permitted in the lease;
- the intended assignee is a partnership or trust; or
- the assignment does not meet the requirements of our
Broken Chain of Title
If the lessee’s chain of title is irretrievably broken, (e.g. Company XYZ has been dissolved), lessee(s) may complete and submit a Request for Clarification of Lease Interest form (Word). This document can be completed and printed online. All documentation supporting the devolution of title to the desired lessee(s) must be included with the submission. PrairieSky Royalty will not consider a Request for Clarification of Lease Interest if a Lease Assignment can be executed by the appropriate parties.
Upon review and confirmation of the title chain, we will prepare and forward a Lease Interest Clarification Agreement (Word) for execution. The sample here is provided for information only and is subject to change without notice. Our lease records will be updated following receipt of the executed Agreement by all applicable parties.
Lease Continuations Beyond Primary Term
PrairieSky has a Lease Continuation Application (updated March 2019) form which requests the lessee to provide information pertinent to confirm continuation of leases beyond primary term. While the use of the form is not a requirement under all leases, we have found that using the application form does expedite the continuation process. PrairieSky does not continue leases based on geological mapping.
Depending on the specific terms of the lease, the formations eligible for continuation may either be those individual formations with active operations (formation-based leases) or all formations to the base of the deepest formation with operations (deep rights reversion leases).
Regardless of the type of lease, continuations are based on formations as opposed to a group of formations. For example, a PrairieSky lease at the end of its primary term that is producing from the Sparky formation will only be continued in (or to the base of) the Sparky formation, not in (or to the base of) the Mannville Group.
Further examples of this include the Belly River being a Group consisting of the Oldman, Foremost and Basal Belly River formations; the Edmonton Group typically consists of the Scollard and Horseshoe Canyon formations; and the Mannville Group includes the Colony, Sparky, Rex, Glauconite, Ellerslie, Dina and several other formations.
For any questions regarding the Lease Continuation Application please email: LandComplianceInquiries@prairiesky.com.
When a potential offset well obligation is identified by PrairieSky on its lands, the following process will apply:
1. An Offset Notice will be issued to all those parties recognized at that time as legally bound and liable under the lease or governing agreement to satisfy that offset obligation. If more than one party is responsible to satisfy the offset obligations, they may appoint a single party to respond to the Offset Notice by completing and returning an Authorization Form – Mineral Leases (updated October 2019) (Word). PrairieSky Royalty will only correspond with those recognized parties and cannot accept responses or authorizations from other unrecognized parties.
2. The parties receiving an Offset Notice are asked to complete and submit a standardized Offset Notice Response Form (Word), unless otherwise indicated in the Offset Notice. This document can be completed and printed online.
3. The Offset Notice Response Form allows the obligated parties to elect one of four options, to the extent permitted and in accordance with the applicable lease or governing agreement:
- notify us if there is a well on the PrairieSky lands producing from the offset formation which satisfies the obligation per the terms of the lease or governing agreement;
- extend the time required to commence drilling a well by paying a compensatory royalty based on production from the offsetting well(s) based on the terms of the lease or governing agreement;
- surrender lands and/or formations per the offset clause of the lease or governing agreement; or
- request a technical review of the Offset Notice with submission of technical data to support a claim that an offset is not valid.
Many of PrairieSky’s leases or agreements do not include the option to recomplete an existing well to satisfy an offset obligation. Under certain circumstances however, PrairieSky Royalty will consider a proposal to recomplete a well to satisfy an offset. Approval is at the sole discretion of PrairieSky. Recompletion proposals will be reviewed internally only by PrairieSky technical staff and will be handled in confidence.
Leases or Agreements that do not provide for payment of a Compensatory Royalty
Certain PrairieSky’s leases and agreements do not include an option to pay a compensatory royalty. Under some circumstances, however, PrairieSky may offer an option to pay a compensatory royalty to satisfy an offset. The offer of a compensatory royalty option, where it is otherwise not provided for, will only be open for acceptance if all obligated parties respond to the Offset Notice within the requested timelines.
Where the offset provision of the lease or governing agreement does not provide for surrender of non-producing formations or payment of a compensatory royalty, PrairieSky may alternatively, at is sole discretion, offer an obligated party one of the following forms of agreement for execution to satisfy an offset obligation:
Partial Lease Continuation Agreement (Word)
Compensatory Royalty Agreement (Word)
The sample agreements are included here for information only, are subject to change without notice and do not create any binding obligations on PrairieSky to enter into any such form of agreement with an obligated party.
Royalty Deductions Guidelines
PrairieSky has many lease forms, and these guidelines for the calculation of deductions are applicable to most lease forms that permit deductions. In the event of a conflict between these guidelines and the lease, the specific terms of the lease shall prevail.
Note: To the extent that an overriding royalty is payable to PrairieSky subject to deductions based on actual costs, PrairieSky will also accept deductions under any such overriding royalty agreement to be determined in accordance with these guidelines; in which case, any reference to the lessee and the lease in these guidelines shall mean the payor and that overriding royalty agreement.
Terminations & Reversions
The first stage of our review process is to identify those leases, if any, that are not producing leased substances and are, therefore, potential termination candidates. PrairieSky Royalty will also confirm the extent to which active leases are continuing beyond their primary term.
The first stage of our review process is to identify those leases, if any, that are:
- not producing leased substances and are, therefore, potential termination candidates; and
- confirm the extent to which active leases are continuing beyond their primary term.
Lessees will be advised in writing of the outcome of this review. Lessees who disagree with our assessment of lease termination or rights reversion will be given the opportunity to present technical data in support of their position by completing and submitting a Technical Review Request Form (Updated March 2019). This document can be completed and printed online.
Upon lease termination, unless PrairieSky Royalty elects to take over the well(s), lessees are required by the terms of their leases to properly abandon all wells on the lands in accordance with applicable laws and regulations, in a manner satisfactory to the regulatory authority (i.e. the Alberta Energy Regulator (AER)). Any abandonment notices we send to lessees will be copied to the AER as a matter of course and the AER may choose to take further action at its sole discretion.
Trespass & Conversion
In the course of our review for terminations and reversions, we anticipate that we may encounter instances where lessees appear not to have complete rights to produce leased substances from PrairieSky Royalty’s lands. Insufficient rights to produce may encompass trespass into formations not included under lease or incomplete control of the applicable drilling or production spacing unit.
When these situations are encountered, we will advise lessees by issuing a Trespass Notice or Notice of Incomplete Mineral Rights (conversion). In cases of trespass and conversion, the value of any PrairieSky Royalty owned production will be included in the calculation for purposes of restitution. In addition, a fee of $50,000 may be assessed as a bona fide estimate of our cost to identify, monitor and rectify instances of trespass and conversion.
Lessees will have the opportunity to present information to refute the validity of any notices they receive.
Production Allocation Agreement (Horizontal Well)
A Production Allocation Agreement is required for any horizontal well drilled on lands where one or more of the following apply among the applicable spacing units:
- there is different royalty ownership;
- there are different royalties payable; or
- there are different lessees and/or working interest participants.
The Well Production Allocation Percentage (defined in the Production Allocation Agreement) is calculated based on the proportionate interval length of the horizontal well contained within the boundaries of each Allocation Land Parcel (also defined in the Production Allocation Agreement) to the length of the horizontal leg of such well pursuant to the pre-drill or post-drill survey submitted to the applicable regulator.
The Well Production Allocation Percentage is required to be attributed to each of the applicable Allocation Land Parcels under the Title Documents.
Each Allocation Land Parcel shall reflect no more than the impacted spacing units, as defined by the applicable regulations.
Production Allocation Agreement Forms
Choose the Production Allocation Agreement for either mineral leases or overriding royalty agreements:
Production Allocation Agreement (Horizontal Well) – Mineral Leases (Updated July 2019)
Please refer to the Instructions for guidelines on filling out the Agreements.
For the “Title Documents” applicable to the spacing units involved where the ownership is less than 100%, a separate Allocation Land Parcel number is required (#1, #2, etc.). The interest will be reflected in the resulting Well Production Allocation Percentage.
For Allocation Land Parcels, please also include reference to the original parties under the “Agreement Name and Date” description.
For unit to non-unit production allocation, choose the Production Allocation Agreement form that corresponds to PrairieSky’s royalty interest in the non-unit lands.
The “Production Allocation Substance” should include reference to all well substances that are applicable to the Production Allocation Agreement.
- Typically for Oil Wells: petroleum, solution gas and related hydrocarbons
- Typically for Gas Wells: natural gas and related hydrocarbons
Where a Party to the Production Allocation Agreement is not recognized under the applicable Title Documents, an executed Authorization Form – Production Allocation Agreements (*Updated October 2019) is required.
Saskatchewan Pre-License Production Allocation Agreement Form
In the submission of a Production Allocation Agreement (Horizontal Well) for a Saskatchewan pre-licensed well, we note that the “Effective Date” and “Well License #” fields of the Production Allocation Agreement (Horizontal Well) will need to be left blank until such time as the well is on production. Once that date has been determined, please provide confirmation of the “Effective Date” and “Well License” to PrairieSky (ProductionAllocations@prairiesky.com) to finalize the agreement.
Submission of Forms and Queries
Submit the completed Production Allocation Agreement (Horizontal Well) for approval and execution to ProductionAllocations@prairiesky.com.
The pre-drill or post-drill survey, as applicable, should accompany the completed Production Allocation Agreement (Horizontal Well) form, if such surveys have not previously been sent to PrairieSky.
Please contact ProductionAllocations@prairiesky.com for questions about the applicable form or unique requirements that are not addressed or contained within the applicable form (example: a deviated well).
Coal Consent – D56 Notifications
Please send Coal Consent – D56 Notifications via email to: Coalconsent.email@example.com
(*updated November 2019)
(*updated February 2020)